North Dakota Credit Union regulator asks for investigation of NCUA closed-meeting practices

BISMARCK, N.D. - Last year, Gary Preszler, commissioner and chairman, North Dakota Credit Union Board was one of two state regulators-the second was from Texas-who were the first to file exemption petitions from NCUA's member business lending final rule, 12 CFR Parts 701, 722, 723 and 741(CU Times, Sept. 8, 1999.) By November, Texas had the agency board's approval in hand. North Dakota CUs weren't as fortunate. In a closed meeting on April 13, the NCUA Board considered North Dakota's rule and denied it. That closed meeting has become the germinator for a request mailed by Preszler to the NCUA Office of Inspector General to "review the practice of the General Counsel certification of closed meetings exemptions and the failure of the NCUA Board to comply with its own rules and regulations." "I have a concern that involves what I believe to be mismanagement within the NCUA open meeting laws interpretation and implementation," Preszler wrote Inspector General Frank Thomas. In Aug. 1999, Preszler mailed the state's proposed member business lending rule to NCUA Region V Director James L. Skiles. The RD recommended to deny the rule, but as part of his recommendation he asked the NCUA Board to consider North Dakota's request during a closed meeting since part of his recommendation was to also discuss reports of examinations conducted on North Dakota CUs. North Dakota's proposed MBL rule was placed on the NCUA Board's April 13 meeting, closed agenda. The board denied the petition. Preszler told Credit Union Times he does not intend to pursue an appeal of the board's denial of the state's MBL exemption petition because "there's little to be gained from filing an appeal. Individual credit unions can still ask for individual waiver. We are encouraging them to do that and many already have." Instead, he said, "My intention is to require NCUA to follow its own rules regarding open and closed meetings." In Preszler's letter, he refers to Section 791.12 of NCUA Rules and Regulations concerning exemptions to public observation of NCUA agenda items. "Clearly discussion related to reports of examination fall within the exemptions under Section 791.12(a)(8)," Preszler wrote. "I have no dispute with General Counsel certification to move discussion on reports of examination to a closed meeting, as it is appropriate for any regulatory agency to protect confidential and potentially sensitive information from the public. "My dispute, however, is that only discussion related to reports of examination should have been considered by the NCUA Board in a closed meeting, and that the remaining discussion and vote should have been conducted in an open meeting," Preszler continued. Preszler further pointed out that, "The NCUA Rules and Regulations provide that the Board may `close any portion of a meeting' and therefore consider items in both open and closed meeting.' " Preszler asserts that when he became aware of the board's intention to consider the North Dakota rule entirely in a closed session, he faxed a letter to the Secretary of the (NCUA) Board requesting that a "portion of the MBL Rule with the exception of the examination report discussion" be considered in an open board meeting. He also called each of the three NCUA Board members and left messages for two of them. Preszler did speak with NCUA Chairman Norm D'Amours and discussed the matter with him. He said the chairman insisted that "we (the NCUA Board) have never split an item on the agenda before." By referencing board activity reports on the NCUA's Web site, Preszler said he found this practice is predominant even though "NCUA Rules are straightforward and provide that agenda items or any portion of an agenda item can be considered in either a closed or an open meeting." What Preszler continues to find particularly troubling is that he's had no opportunity to learn what the NCUA Board's vote was on the North Dakota proposed public rule. At press time, he hadn't received any correspondence from NCUA about why the state's proposed MBL rule was denied. "The only response" he's received, he wrote the Inspector General, "was a telephone call from the Regional Director stating the Board agreed with his recommendation, and the NCUA Web site closed agenda action contains one sentence stating `the Board voted unanimously to deny a request from the North Dakota state supervisory agency to approve a state rule regarding member business loans for use for state-chartered, federally-insured credit unions under the provisions of Section 723.20 of NCUA regulations." At press time, Credit Union Times learned from Buell Reich, president, North Dakota Credit Union League that the league's government affairs committee planned to recommend to the NDCUL Board that legislation be introduced that would allow state-chartered credit unions to be privately insured. Reich said that would provide the credit unions greater flexibility and make it easier for them to make member business loans. The North Dakota legislature convenes in Jan. 2001. Reich said the league is looking for sponsors of the bill in both the state House and Senate. -ekingoff@cutimes.com